One Comment About Taxation – Canada Needs Bold Taxation Policy With Taxation Reform to Assist With Economic and Productivity Improvements 

 

By now, it’s well accepted that Canada is having significant challenges economically.  Especially with productivity.  Despite an outlier report released by the IMF earlier this month that suggested Canada will be a leader in economic growth next year (that had many Liberal MPs crowing that their “economic plans are working!”), the overwhelming view of most suggest otherwise.  

 

With our federal government not wanting to reduce spending and our interest costs on debt continuing to rise, it’s not surprising that the federal government is looking for ways to finance such spending.  In plain English, if spending doesn’t materially decrease, then new sources of tax revenues will need to arise.  

 

That’s why it’s not surprising, although it is disturbing, that PM Trudeau and Finance Minister Freelandhave been hanging out with so-called “think-tanks” that promote a home equity tax to apparently solve housing affordability issues for youth.  The idea is simple nonsense and has many problems such as attacking our seniors who may be “house rich” but “cash poor”.  

 

In the last 9 years since the Liberal government came to power, they have introduced a bevy of taxes to finance their out-of-control spending. Examples include the 2016 new 4% increased tax on the so-called wealthy, the revised “tax on split income” (TOSI) regime in 2018 that had – and continues to have – small business owners square in its sights, the poorly thought-out Underused Housing Tax which is estimated to raise paltry amounts of tax, a new luxury tax applied against the sale of certain automobiles, aircraft and boats (also estimated to raise paltry amounts of tax), adjustments to the Alternative Minimum Tax (which will, even after some recent amendments, greatly impact charitable donations) and, of course, the increase to the capital gains inclusion rate from 50% to 2/3’s which apparently is necessary to deal with “intergenerational fairness” and to prevent the “rich” from living in ever increasing “high walls” while the commoners are envious at their gates (both are offensive and nonsensical speaking points).  

 

Additional examples include adjustments to the deduction of interest costs which will harm many capital intensive businesses that rely on debt financing, the ridiculous “flipping tax” for dispositions of residential property and the very poor prohibition of expenses on short-term rental property income when such income is generated in a municipality that prohibits such activity.  And, of course, can’t forget about the ridiculous consumer carbon tax.  

 

Virtually all of the above examples of direct and indirect tax increases (with the exception of the very technical TOSI and interest deduction regimes) have one thing in common.  They are all “showy” and devoid of good taxation policy that are intended to display to the Liberal Party voter base that they are going after the “rich”, shutting down “loopholes”, dealing with bogeymen that are apparently causing housing shortages and / or pushing the Liberal Party ideology.  

 

They are also not big tax revenue generators and without significant attempts to get government spending under control, Canadians should expect a lot more of the “showy”, fluffy, and poor policy tax measures.  

Instead, Canada needs some big and bold new thinking when it comes to taxation policy.  Ideally such a re-think would bring tax simplification to our taxation statute and related administration.  Our country’s immediate priorities, however, need our taxation policies to help with our sagging economic results and poor productivity. 

 

It starts with the easy targets.  Significant and deep spending cuts should assist in providing personal tax rate reductions for ALL Canadians to make us much more competitive with our southern neighbour and other countries.  Scrapping all of the above recent showy tax provisions is also an easy target and should be done.  

 

However, Canada needs bold thinking on how to attract investment (and re-investment), encourage entrepreneurship and how to entice and retain talent.  

 

One such idea, a “distributed profits tax” approach modeled after what the small Baltic country of Estonia has implemented, was written about by the eminent Dr. Jack Mintz in a 2022 paper.  University of Calgary professor Trevor Tombes and The Fraser Institute also recently wrote about it. 

 

Overly simplified, a corporation in Estonia pays zero corporate tax unless and until profits are distributed to its shareholders.  This encourages significant investment and re-investment including many entrepreneurial start-ups. It also encourages much simpler administration. Unlike Estonia’s system, however, Dr. Mintz advocates for no deferral on passive income and capital gains realized by a corporation and instead calls for immediate taxation so as to discourage the use of the corporation to avoid personal income taxes.  That idea has merit.  

 

Estonia implemented its new system in the year 2000 and its economic growth and related statistics is very impressive.  As The Fraser Institute pointed out, for every 1,000 people in 2023, Estonia had 17.8 business startups, while Canada had only 4.9. They further pointed out that Estonians start 45 times more information, communication and technology businesses than Canadians on a per capita basis. Wow.  

There are a lot of other good ideas besides the distributed profits tax that is worthy of discussion to help Canada get back on track. 

 

As the ancient Roman poet Horace said: “Begin, be bold and venture to be wise”.  

 

I agree.  It’s time to scrap the silliness and divisiveness of the past nine years.  

 

Now is the time to begin thinking of other bold ideas for significant tax reform for the benefit of ALL Canadians. It’s time to be bold about it. And Canada would be wise to, once again, get back to encouraging success and celebrating it. 

 

One Comment About Leadership – Good Leaders Use Humor as a Tool

 

Do you like to laugh?  I’m sure you do.  I honestly don’t know a single person who doesn’t like to laugh.  As the old saying goes, “laughter is the best medicine”. There’s a lot of truth to that.  Even the world-renowned Mayo Clinic has a whole page on how beneficial laughter can be.  They note some of the benefits to be stress relief, stimulation of organs, improvements in your immune system, relief from pain and improvements in mood.  

 

For leaders, the deployment of humor can be a very valuable tool in team building.  But it takes practice.  Especially in today’s ultra-sensitive world where it can seem that everything that comes out of your mouth can be offensive in some form or fashion to someone. 

 

For me, I love to use humor in a variety of settings including client meetings, board meetings, meetings with peers, teammates and even when parenting my children. For example, during the early COVID period when some of my kids were stressed about having to take school online (grrrr…. I still get frustrated thinking about that), I would send all of them a “Dad joke” that I would text to them at 7 am religiously every morning.  I would get the usual groans but soon my kids grew to expect such jokes by 7 am.  If I ever missed one (rarely), I would soon get a text asking me what the joke of the day was.  This is an example of humor being deployed methodically to try to bring the temperature down just a little bit.  

 

Overall, I find the use of humor in leadership settings helps me display my authenticity, be more transparent and can assist with team building.  Self-deprecating humor, deployed in the right way, can also help leaders display a level of humility.  

 

The use of humor is not something that is learned overnight.  If you’re a leader and not deploying humor in your leadership, be methodical about it and try to create your own style with it.  There are some great books on this topic and I’d suggest reading some of them.  

 

Humor can be a very powerful leadership tool. 

 

One Comment About Economics: The Economic Cost of the Devastating Jasper Fires

 

Like you, I was devastated to learn of the tragedy in Jasper, AB.  For those of you who have visited Jasper, you’ll likely agree with me that it is a jewel of this Earth in its breathtaking beauty.  One of my favorite places to stay is Jasper Park Lodge so I was relieved to learn that it suffered minimal damage compared to other structures.  As I mentioned in a LinkedIn post about the tragedy:

 

There will be a time to point fingers about forest management practices.  Not now.  

 

And for those trying to make this tragedy political by pointing fingers at politicians / political parties or saying “climate change is real!!”, take your vileness and shallow thinking elsewhere.  

 

Instead, let’s show some genuine compassion.  

 

Yes, there indeed will be a time to point fingers about forest management practices and that day is coming quickly.  For some, it has already arrived but not for me.  I’m still wanting to do what I can to assist the Jasper residents deal with the devastation.  

 

A recent media report estimated that the Jasper insured losses could reach record territory in the amount of $700M.  While that is far less than the record amount of $4.4B set by the Fort McMurray, AB fire of 2016, the Jasper losses are still tremendous and will have a devastating impact on local tourism, business and resident’s way of life.  

 

Please do what you can to help out. 

 

Bonus Comment – Quote From Martin G Moore – American Author and Speaker – About Using Humor in Leadership Situations

 

 

“You need to be serious about leadership, and serious about getting the results that you’re paid to get for your organization. That means you’ve got to do some hard stuff, but knowing that humor is a positive force in people’s lives, that it actually creates performance benefits, and that it makes otherwise dire situations bearable should be enough to motivate you to try the odd laugh at work.

 

It doesn’t even need to detract from your self-perception of being busy and important. If you get it right, your people will look back fondly on the days they worked for you. “We achieved great things and we had a lot of fun doing it.”

 

Absolutely.  Leaders, consider using humor in your leadership toolbox.

 

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